A lot has been said
and written about demonetization. This is the third demonetization of higher
currency undertaken by the Indian authorities, if we include the one done just
before independence in 1946. The move by the government to ban Rs 500 and 1000
notes has been praised and criticized. In elected democracies major economic decisions have a political dimension. No politician would willingly risk growth, commerce and jobs if he did not know there would be political gains at the end of the tunnel. Whether it is a 2% GDP growth loss, a deceleration is unavoidable.
Many say, it’s a brave move by the
government; majority agree, the intent is good but the implementation has been adhoc and
shoddy. But the fact is, it has crippled the nation. There are long queues in
front of banks and a reduction in trade and business. It is bound to impact on
the GDP of the country. It is very rare to remove 86 per cent of the currency
in one go. The logistics of such an operation is mammoth one. The government
has been accused of being reactive to the situation with adhoc decisions. The
withdrawal of Rs 500 and Rs 1000 notes has created havoc for families with
marriages and other ceremonies scheduled, has also hit business and trade.
There is a slowdown in the manufacturing industry, small scale units and unorganized
sectors have been hit hard. The rural economy too has been crippled.
The benefits if any of
demonization, only time will tell. The only short term benefits of it would
result in people shifting towards the use of debit cards and digital
transactions in the urban areas. In rural areas, illiterate farmers may be
exploited as they are only used to cash transactions, and very few number of banks
in remote areas are accessible to them. The real estate will definitely be affected
by demonetization exercise, as traditionally seen a very high involvement of
black money and cash transactions.
Whatever the misgivings about the long term impact on the economy, no one can predict what is likely to unfold. We will have to wait and watch. But one major factor will undoubtedly remain as a legacy of this unprecedented move is the return of the government in our lives in an irritatingly permanent way. The role of the authorities in our lives is bound to go up substantially. The fear being, somebody is watching.
Whatever the misgivings about the long term impact on the economy, no one can predict what is likely to unfold. We will have to wait and watch. But one major factor will undoubtedly remain as a legacy of this unprecedented move is the return of the government in our lives in an irritatingly permanent way. The role of the authorities in our lives is bound to go up substantially. The fear being, somebody is watching.
The move, if it will
meet the objectives of curbing corruption, counterfeit currencies and black
money as spelt out by Prime Minister, is to be seen in the coming months. Many
feel the real impact of demonetization will be felt in about six months time
affecting agriculture, small scale industry and the unorganized sector. And
also trade, business and commerce in general. It is still too early to
accurately gauge the depth of the shakeup this has caused. Demonetisation may
whiten the economy, but for now it has blackened the mood!
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| Mahuli Temple, Shiroda, Maharastra |
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